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Sentiment Extremes in the Canadian Dollar

Sentiment Extremes in the Canadian Dollar

2013-10-10 17:05:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • Sentiment extreme in USD/CAD
  • Cycles turning lower over next few days

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The lack of volatility in G10 FX over the past few months has made trading in the space quite difficult. Not surprisingly, this lack of volatility has led to fairly neutral sentiment across the board. We closely follow the Daily Sentiment Index or DSI, which measures the opinions of short-term futures traders on a daily basis. Most of the major currencies have been stuck between 30% and 70% bulls for the better part of a few months. The one exception is the Canadian Dollar. On Wednesday, the Loonie touched just 12% bulls on the DSI which is indicative of some very negative sentiment being exhibited towards the currency. The extreme is somewhat surprising given USD/CAD is not really near highs. In any event, our cyclical analysis suggests that the next couple of days are a turn window where the USD/CAD could try to turn lower. With sentiment so pessimistic towards the Loonie it should only further help the case for a reversal should it materialize.

USD/CAD Daily Chart: October 10, 2013

range_cad_body_Picture_2.png, Sentiment Extremes in the Canadian Dollar

Charts Created using Marketscope – Prepared by Kristian Kerr

Key Event Risks in Coming Sessions:

range_cad_body_Picture_1.png, Sentiment Extremes in the Canadian Dollar

LEVELS TO WATCH

Resistance: 1.0410(Gann), 1.0455 (Fibonacci)

Support: .1.0345(Fibonacci), 1.0300 (Gann)

Strategy: Sell USD/CAD

Entry: Sell USD/CAD at 1.0410

Stop: 1-day close above 1.0455

Target: 1.0300

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

Are you looking for other ways to pinpoint support and resistance levels? Take our free tutorial on using Fibonacci retracements.

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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